Global financial institutions underwent a significant downsizing in 2023, eliminating over 60,000 jobs.
This represents one of the most substantial reductions in personnel since the global financial crisis of 2008 and marks a drastic reversal of the aggressive hiring sprees witnessed during the pandemic recovery.
Investment banks, the engine of dealmaking on Wall Street, faced the brunt of this contraction.
Plummeting fees for the second consecutive year, fueled by a decline in both mergers and acquisitions and initial public offerings, severely impacted their revenue streams.
To safeguard profit margins, these institutions resorted to workforce reductions as a primary means of cost control.
According to a Financial Times report, the landscape was further complicated by the recent integration of Credit Suisse into UBS. This consolidation resulted in an immediate elimination of at least 13,000 roles, with concerns of additional substantial job cuts looming shortly.
These widespread job cuts within the financial sector underscore the fragility of the post-pandemic recovery and its uneven impact across different industries.
The ripple effects are likely to be felt beyond Wall Street, potentially impacting ancillary services and local economies globally.
- “There is no stability, no investment, no growth in most banks — and there are likely to be more job cuts,” said Lee Thacker, owner of financial services headhunting firm Silvermine Partners, adding: “There are some very nice gifts being sent to bosses at the moment.”
World’s biggest banks:
Twenty of the world’s biggest banks cut at least 61,905 jobs in 2023, according to Financial Times calculations. That compares with more than 140,000 jobs slashed by the same lenders during the global financial crisis of 2007-08.
The FT used company disclosures and its reporting to compile the data and did not include smaller banks or minor staff cuts so the overall total of job losses in the sector will be higher.
Previous years of extensive job losses by banks, such as 2015 and 2019, were affected by large-scale cuts at European lenders struggling to cope with historic low interest rates. But at least half of 2023’s reductions came from Wall Street lenders, whose investment banking businesses have struggled to cope with the speed of interest rate rises in the US and Europe.
The report noted that in many of those instances, the lenders are rowing back on hires they made coming out of the pandemic when pent-up demand for dealmaking sparked a war for talent between investment banks.
However, the biggest cuts by a single institution came at Switzerland’s UBS as it began to digest its former rival.
Within hours of Credit Suisse’s rescue in March, market watchers began predicting that the most significant banking merger since the financial crisis would result in tens of thousands of job cuts.
Credit Suisse had already planned to slash 9,000 roles, but UBS was expected to cut further and faster as it removed duplicate positions and wound down much of its former competitor’s accident-prone investment bank.
According to the report, in November, UBS disclosed that it had already cut 13,000 jobs from the combined group, leaving it with a total headcount of 116,000.
But chief executive Sergio Ermotti has signalled that 2024 will be the “pivotal year” for the takeover and analysts expect thousands more jobs to go in the months ahead.
The second-biggest cutter of 2023:
The report noted that the second-biggest cutter of 2023 was Wells Fargo, which this month revealed it had lowered its global headcount by 12,000 to 230,000. The bank said it had spent $186 million on severance costs in the third quarter alone, with 7,000 jobs jettisoned.
Chief executive Charlie Scharf announced that the bank had set aside as much as $1bn for further severance costs, suggesting tens of thousands of more jobs are at risk.
The other big Wall Street lenders resumed their annual “reduction in force” redundancy programmes in 2023, having skipped a few years since the start of the pandemic.
Citigroup cut 5,000 jobs, Morgan Stanley shed 4,800, Bank of America 4,000, Goldman Sachs 3,200, and JPMorgan Chase 1,000. Collectively, the big Wall Street banks cut at least 30,000 staff in 2023.
- “The revenues aren’t there, so this is partly a response to overexpansion. But there is also a simpler explanation: political cost-cutting,” said Thacker. “If you run a division and your boss asks for savings, you cut or you get fired.”
As recently as January 2022, Deutsche Bank chief executive Christian Sewing said he was “very concerned” that the competition to hire staff had driven up remuneration costs across Wall Street, where pay rose by almost 15% over the previous 12 months.
But less than two years on, a dearth of dealmaking has forced lenders to streamline their investment banks.
Data from Coalition Greenwich:
According to the report, data from Coalition Greenwich, the financial services benchmarking group, showed the biggest investment banks cut back their staff by 4% in the first half of the year alone, with more cuts coming in the second half of the year.
Yet the reductions were not as deep as the more significant falls in revenues, which Gaurav Arora, global head of competitor analytics at Coalition, said was due to banks being optimistic about a return to dealmaking in the new year.
- “Some banks are hesitating at the moment because of the amount of dry powder sitting on the sidelines, especially in the Americas,” he said.
While most of the staff reductions at global banks this year have affected less than 5% of staff, the UK’s Metro Bank has announced plans to cut a fifth of its workforce.
The high street lender was rescued in a £925 million refinancing deal in October having run into trouble a month earlier after the Bank of England declined to grant it capital relief for mortgage lending until at least 2024, which resulted in a capital hole.
Metro is now targeting annual savings of £50 million a year — up from a previous goal of £30 million — which will result in branch closures and the departure of up to 800 staff.